Note 10 –Debt

The following is a summary of our debt and finance leases as of September 30, 2020 (in millions):

The following is a summary of our debt and finance leases as of December 31, 2019 (in millions):

Recourse debt refers to debt that is recourse to our general assets. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. The differences between the unpaid principal balances and the net carrying values are due to convertible senior note conversion features, debt discounts or deferred financing costs. As of September 30, 2020, we were in material compliance with all financial debt covenants, which include minimum liquidity and expense-coverage balances and ratios.

2021 Notes, 2022 Notes and 2024 Notes

During the first quarter of 2020, we classified the carrying value of our 2021 Notes as current liabilities as the maturity date of the 2021 Notes is March 2021. During each of the quarters of 2020 through September 30, 2020, the closing price of our common stock exceeded 130% of the applicable conversion price of each of our 2021 Notes, 2022 Notes and 2024 Notes on at least 20 of the last 30 consecutive trading days of the quarter; causing the 2021 Notes, 2022 Notes and 2024 Notes to be convertible by their holders during the second, third and fourth quarters of 2020. As the settlement of conversion of the 2021 Notes would be in cash for the principal amount and, if applicable, cash and/or shares of our common stock for any conversion premium at our election, we reclassified $26 million, representing the difference between the aggregate principal of our 2021 Notes and the carrying value as of September 30, 2020, as mezzanine equity from permanent equity on our consolidated balance sheet as of September 30, 2020. As we now expect to settle a portion of the 2022 and 2024 Notes in the fourth quarter of 2020, we reclassified $249 million and $32 million, respectively, of the carrying value of the 2022 and 2024 Notes from debt and finance leases, net of current portion to current portion of debt and finance leases on our consolidated balance sheet as of September 30, 2020. Additionally, we reclassified $13 million and $9 million, respectively, representing the difference between the current portion of aggregate principal of our 2022 and 2024 Notes and the current portion of the carrying value as of September 30, 2020, as mezzanine equity from permanent equity on our consolidated balance sheet as of September 30, 2020. As the settlement of conversion of the remainder of the 2022 Notes and 2024 Notes would be in cash, shares of our common stock or a combination thereof is at our election, the liability is classified as non-current. Should the closing price conditions be met in a future quarter for any of these notes, such notes will be convertible at their holders’ option during the immediately following quarter. The debt discounts recorded on the 2021 Notes, the 2022 Notes and the 2024 Notes is recognized as interest expense through the respective maturity dates of each note and early conversions can result in the acceleration of such recognition.

As adjusted to give effect to the Stock Split, each $1,000 of principal of the 2021 Notes, 2022 Notes and 2024 Notes is now convertible into 13.8940 shares, 15.2670 shares and 16.1380 shares, respectively, of our common stock, which is equivalent to conversion prices of approximately $71.97, $65.50 and $61.97 per share, respectively. Under the note hedge transactions we entered in connection with the issuance of the 2021 Notes, 2022 Notes and 2024 Notes, we have the option to purchase 19.2 million shares, 14.9 million shares and 29.7 million shares, respectively, for the 2021 Notes, 2022 Notes and 2024 Notes at prices of approximately $71.97, $65.50, and $61.97 per share, respectively, as adjusted to give effect to the Stock Split. Additionally, in connection with the issuance of the 2021 Notes, 2022 Notes and 2024 Notes, we sold warrants whereby the holders of the warrants have the option to purchase 19.2 million shares, 14.9 million shares and 29.7 million shares, respectively, for the 2021 Notes, 2022 Notes and 2024 Notes at prices of approximately $112.13, $131.00, and $121.50 per share, respectively, as adjusted to give effect to the Stock Split. Taken together, the purchase of the convertible note hedges and the sale of the warrants are intended to reduce potential dilution from the conversion of the 2021 Notes, 2022 Notes and 2024 Notes and to effectively increase the overall conversion price from approximately $71.97, $65.50, and $61.97 per share, respectively, to approximately $112.13, $131.00, and $121.50 per share, respectively.

Credit Agreement

In March 2020, we upsized our senior asset-based revolving credit agreement (the “Credit Agreement”) by $100 million, which matures July 2023, to $2.525 billion. In June 2020, $197 million of commitment under the Credit Agreement expired in accordance with its terms and the total commitment decreased to $2.328 billion.

Zero-Coupon Convertible Senior Notes due in 2020

During the second quarter of 2020, $67 million in aggregate principal amount of the Zero-Coupon Convertible Senior Notes due in 2020 were converted, pursuant to which we issued 1.1 million shares of our common stock to the holders of such notes, as adjusted to give effect to the Stock Split. 

During the third quarter of 2020, $33 million in aggregate principal amount of the Zero-Coupon Convertible Senior Notes due in 2020 were converted, pursuant to which we issued 0.6 million shares of our common stock to the holders of such notes, as adjusted to give effect to the Stock Split. 

As adjusted to give effect to the Stock Split, each $1,000 of principal of the Zero-Coupon Convertible Senior Notes is now convertible into 16.6665 shares of our common stock, which is equivalent to a conversion price of $60.00 per share.

Automotive Asset-backed Notes

In August 2020, we transferred beneficial interests related to certain leased vehicles into a special purpose entity and issued $709 million in aggregate principal amount of Automotive Asset-backed Notes, with terms similar to our other Automotive Asset-backed Notes. The proceeds from the issuance, net of discounts and fees, were $706 million.

China Loan Agreements

In May 2020, one of our subsidiaries entered into an additional Working Capital Loan Contract (the “2020 China Working Capital Facility”) with a lender in China for an unsecured revolving facility of up to RMB 4.00 billion (or the equivalent amount drawn in U.S. dollars), to be used for expenditures related to production at our Gigafactory Shanghai. Borrowed funds bear interest at an annual rate of: (i) for RMB-denominated loans, the market quoted interest rate published by an authority designated by the People’s Bank of China minus 0.35%, (ii) for U.S. dollar-denominated loans, the sum of one-year LIBOR plus 0.8%. The 2020 China Working Capital Facility is non-recourse to our assets and will mature in June 2021, the first anniversary of the first borrowing under the loan.

In September 2020, the revolving facility that one of our subsidiaries entered in September 2019 to finance vehicles in-transit to China matured.

Warehouse Agreements

In August 2020, one of our subsidiaries terminated the loan and security agreement entered in December 2018 (the “2018 Warehouse Agreement”) after having fully repaid all obligations thereunder. The loan and security agreement entered in August 2016 and amended and restated in August 2017 (the “2016 Warehouse Agreement”) is the only remaining facility under our Warehouse Agreements. In August 2020, we further amended and restated the 2016 Warehouse Agreement (the “A&R 2016 Warehouse Agreement”) to extend the maturity date to September 2022. The A&R 2016 Warehouse Agreement has an aggregate lender commitment of $1.10 billion, the same amount as the aggregate lender commitment previously shared with the 2018 Warehouse Agreement prior to the termination of the latter.

Automotive Lease-backed Credit Facilities

In September 2020, a special purpose entity entered into a revolving credit facility with a bank for borrowings secured by the beneficial interests related to certain leased vehicles that we transferred to the special purpose entity. Amounts drawn under this facility bear interests at 1.85% plus LIBOR and are non-recourse to our other assets.

Our credit agreement entered into by one of our Canadian subsidiaries in December 2016, previously referred to as the “Canada Credit Facility,” is also included in this caption.

Interest Expense

The following table presents the interest expense related to the contractual interest coupon, the amortization of debt issuance costs and the amortization of debt discounts on our convertible senior notes with cash conversion features, which includes the 0.25% Convertible Senior Notes due in 2019 (matured in March 2019), the 2021 Notes, the 2022 Notes and the 2024 Notes (in millions):